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<h4>The definitions are not intended to state  or suggest the correct legal significance or meaning of any word or phrase. The  terms and definitions were collected with the intent to assist in your  comprehension of the futures and options industry.</h4>
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   <div class="title"><span class="num">-</span><i class="icon-minus acc-icon-minus"></i><i class="icon-plus acc-icon-plus"></i>Basic Future Terms</div>
   <div class="answer"><h4>Here you can review a list of the  jargon we use in the futures industry. These terms will help you gain a basic  understanding of the &quot;language of the futures industry.</h4>
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<p><strong>Arbitrage</strong><br />
  The simultaneous purchase and sale of identical or equivalent financial  instruments or commodity futures in order to benefit from a discrepancy in  their price relationship.</p>
<p><strong>Ask</strong><br />
  A motion to sell. The same as offer. Indicates a willingness to sell a futures  contract &nbsp;at a given price. </p>
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<p><strong>Back  Month</strong><br />
  Futures delivery months other than the spot or front month (also called  deferred months).</p>
<p><strong>Basis</strong><br />
  The difference between the current cash price and the futures price of the same  commodity. The basis is determined by the costs of actually holding the  commodity versus contracting to buy it for a later delivery. The basis is  affected by other influences as well, such as unusual situations in supply or  demand. Unless otherwise specified, the price of the nearby futures contract  month is generally used to calculate the basis. <em>See Carrying Charge and Cost  To Carry</em></p>
<p><strong>Broker</strong><br />
  A person paid a fee or commission for executing buy or sell orders for a  customer. In commodity futures trading, the term may refer to: (1) Floor Broker  - a person who actually executes orders on the trading floor of an exchange;  (2) Account Executive or Associated Person - the person who deals with  customers in the offices of Futures Commission Merchants; or (3) the Futures  Commission Merchant.</p>
<p><strong>Bid</strong><br />
  The price that the market participants are willing to pay. A motion to buy a  futures or options contract at a specified price. Opposite of offer. </p>
<p><strong>Bear</strong><br />
  One who expects a decline in prices. The opposite of a &quot;Bull.&quot;  Remember that a Bear attacks by striking his paw downward. </p>
<p><strong>Bear  Market</strong><br />
  A market in which prices are dropping. </p>
<p><strong>Bull</strong><br />
  One who expects prices to rise. The opposite of &quot;Bear.&quot; Remember that  a Bull attacks by thrusting his horns upward. </p>
<p><strong>Bull  Market</strong><br />
  A market in which prices are rising. </p>
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<p><strong>Carrying  Charge (Cost of Carry)</strong><br />
  For physical commodities such as grains and metals, the cost of storage space,  insurance, and finance charges incurred by holding a physical commodity. In  interest rate futures markets, it refers to the differential between the yield  on a cash instrument and the cost necessary to buy the instrument. <em>See Basis</em></p>
<p><strong>Cash  Commodity</strong><br />
  An actual physical commodity someone is buying or selling, e.g., soybeans,  corn, gold, silver, Treasury bonds, etc. Also referred to as Actuals. </p>
<p><strong>Cash  Market</strong><br />
  A place where people buy and sell the actual commodities, i.e., grain elevator,  bank, etc. <em>See Spot and Forward Contract</em>. </p>
<p><strong>Cash  Price</strong><br />
  The price of the actual physical commodity that a futures contracts is based  upon. </p>
<p><strong>Commodity</strong><br />
  An article of commerce or a product that can be used for commerce. In a narrow  sense, products traded on an authorized commodity exchange. The types of  commodities include agricultural products, metals, petroleum, foreign  currencies, and financial instruments and indexes, to name a few. </p>
<p><strong>Contract</strong><br />
  Unit of trading for a financial or commodity future. Also, actual bilateral  agreement between the parties (buyer and seller) of a futures or options on  futures transaction as defined by an futures exchange. </p>
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<p><strong>Daily  Trading Limit</strong><br />
The maximum price range set by the exchange each day for a contract. A Trading  Limit does not halt trading, but rather, limits how far the price can move in a  given day. </p>
<p><strong>Day  Order</strong><br />
  An order that is placed for execution during only one trading session. If the  order cannot be executed (filled) that day, it automatically expires at the  close of the trading session. </p>
<p><strong>Day  Trade</strong><br />
  The purchase and sale of a futures or an options contract in the same day, thus  ending the day with no established position in the market or being flat. </p>
<p><strong>Day  Traders</strong><br />
  Speculators who take positions in futures or options contracts and liquidate  them prior to the close of the same trading day. </p>
<p><strong>Day  Trading</strong><br />
  <em>See Day Trade</em></p>
<p><strong>Deferred  Month (AKA: Back Months)</strong><br />
  The more distant month(s) in which futures trading is taking place, as  distinguished from the nearby (delivery) month. </p>
<p><strong>Deliverable  Grades (AKA: Contract Grades)</strong><br />
  The standard grades of commodities or instruments listed in the rules of the  exchanges that must be met when delivering cash commodities against futures  contracts. Grades are often accompanied by a schedule of discounts and premiums  allowable for delivery of commodities of lesser or greater quality than the  standard called for by the exchange. </p>
<p><strong>Delivery</strong><br />
  The transfer of the cash commodity from the seller of a futures contract &nbsp;to the buyer of a futures contract. Each  futures exchanges has specific procedures for delivery of a cash commodity.  Some futures contracts, such as stock index contracts, are cash settled. </p>
<p><strong>Delivery  Month</strong><br />
  A specific month in which delivery may take place under the terms of a futures  contract. Also referred to as contract month or Front month.</p>
<p><strong>Delivery  Points</strong><br />
  The locations and facilities designated by a futures exchange where stocks of a  commodity may be delivered in fulfillment of a futures contract, under  procedures established by the exchange.</p>
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<p><strong>Exchange</strong><br />
  <em>See Futures Exchange</em></p>
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<p><strong>First  Notice Day</strong><br />
According to Chicago Board of Trade rules, &nbsp;the first day on which a notice of intent to  deliver a commodity in fulfillment of a given month's futures contract &nbsp;can be made by the clearinghouse to a buyer.  The clearinghouse also informs the seller who they have been matched up with. </p>
<p><strong>Forex  Futures</strong><br />
  A shortened term for foreign exchange futures, also known as FX or currency  futures. Forex futures are exchange-traded contracts to buy or sell a specified  amount of a currency on a set future date, at a specified price.</p>
<p><strong>Forward  (Cash) Contract</strong><br />
  A cash contract in which a seller agrees to deliver a specific cash commodity  to a buyer sometime in the future. Forward contracts, in contrast to futures  contracts, are privately negotiated and are not standardized. </p>
<p><strong>Front  Month</strong><br />
  <em>See Delivery Month</em></p>
<p><strong>Futures</strong><br />
  A term used to designate all contracts covering the purchase and sale of  financial instruments or physical commodities for future delivery on a  commodity futures exchange. </p>
<p><strong>Futures  Commission Merchant</strong><br />
  A firm or person engaged in soliciting or accepting and handling orders for the  purchase or sale of futures contracts, subject to the rules of a futures  exchange and, who, in connection with solicitation or acceptance of orders,  accepts any money or securities to margin any resulting trades or contracts. The  FCM must be licensed by the CFTC. </p>
<p><strong>Futures  Contract</strong><br />
  A legally binding agreement, made on the trading floor of a futures exchange,  to buy or sell a commodity or financial instrument sometime in the future.  Futures contracts are standardized according to the quality, quantity, and  delivery time and location. </p>
<p><strong>Futures  Exchange</strong><br />
  A central marketplace with established rules and regulations where buyers and  sellers meet to trade futures and options on futures contracts. </p>
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<p><strong>Good  till Canceled (GTC)</strong><br />
An order worked by a broker until it can be filled or until canceled. <em>See Open  Order</em></p>
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<p><strong>Hedge</strong><br />
The purchase or sale of a futures contract as a temporary substitute for a cash  market transaction to be made at a later date. Usually it involves opposite  positions in the cash market and futures market at the same time.</p>
<p><strong>Hedger</strong><br />
  An individual or company owning or planning to own a cash commodity corn,  soybeans, wheat, U.S. Treasury bonds, notes, bills, etc. and concerned that the  cost of the commodity may change before either buying or selling it in the cash  market. A hedger achieves protection against changing cash prices by purchasing  (selling) futures contracts of the same or similar commodity and later  offsetting that position by selling (purchasing) futures contracts of the same  quantity and type as the initial transaction. </p>
<p><strong>Hedging</strong><br />
  The practice of offsetting the price risk inherent in any cash market position  by taking an equal but opposite position in the futures market. Hedgers use the  futures markets to protect their businesses from adverse price changes. <em>See  Selling (Short) Hedge and Purchasing (Long) Hedge</em>. </p>
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<p><strong>Initial  Margin</strong><br />
The minimum value on deposit in your account to establish a new futures or  options position, or to add to an existing position. Initial margin amount  levels differ by contract. </p>
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<p><strong>Last  Trading Day</strong><br />
According to the Chicago Board of Trade rules, &nbsp;the final day when trading may occur in a  given futures or options contract month. Futures contracts outstanding at the  end of the last trading day must be settled by delivery of the underlying  commodity or securities or by agreement for monetary settlement. </p>
<p><strong>Limit  Move</strong><br />
  <em>See Daily Trading Limit</em>.</p>
<p><strong>Limit  Order</strong><br />
  An order given for an options or futures trade specifying a certain maximum (or  minimum) price, beyond which the order (buy or sell) is not to be executed. </p>
<p><strong>Leverage</strong><br />
  The ability to control large dollar amounts of a commodity with a comparatively  small amount of capital. </p>
<p><strong>Limit  Order</strong><br />
  <em>See Price Limit Order</em>. </p>
<p><strong>Liquid</strong><br />
  A characteristic of a security or commodity market with enough units  outstanding to allow large transactions without a substantial change in price.  Institutional investors are inclined to seek out liquid investments so that  their trading activity will not influence the market price. </p>
<p><strong>Liquidation</strong><br />
  Any transaction that offsets or closes out a long or short futures position. </p>
<p><strong>Long</strong><br />
  (1) One who has bought a futures contract to establish a market position; (2) a  market position that obligates the holder to take delivery; (3) one who owns an  inventory of commodities. <em>See Short</em>.</p>
<p><strong>Long  Hedge</strong><br />
  The purchase of a futures contract in anticipation of an actual purchase in the  cash market. Used by processors or exporters as protection against an advance  in the cash price. <em>See hedge, short hedge</em></p>
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<p><strong>Maintenance  Margin</strong><br />
The minimum value that you must keep in your account in order to continue to  hold a position. The Maintenance Margin is typically less than the Initial Margin,  and also differs by contract. If your account falls below the Maintenance  Margin requirement, you will receive a margin call. If you wish to continue to  hold the position, you will be required to restore your account to the full  Initial Margin level (not to the Maintenance Margin level). Also known as the  Maintenance Performance Bond.</p>
<p><strong>Managed  Futures</strong><br />
  Represents an asset class comprised of professional money managers known as  Commodity Trading Advisors ( CTAs) who manage client assets on a discretionary  basis, using global futures markets as an investment medium. </p>
<p><strong>Margin</strong><br />
  <em>See Performance Bond</em>. </p>
<p><strong>Margin  Call</strong><br />
  A demand from a clearinghouse to a clearing member, or from a brokerage firm to  a customer, to bring margin deposits up to a minimum level required to support  the positions held. This can be done by either depositing more funds or  offsetting some or all of the positions held. </p>
<p><strong>Mark-To-Market </strong><br />
  A daily accounting entry that is the bedrock of regulated futures bookkeeping.  It's the end-of-day adjustment made to trading accounts to reflect profits and  losses on existing positions. In other words, winnings are credited and  immediately available to the account and losses are debited and immediately  owed. This brings integrity to the marketplace because participants are not  allowed to trade unless funds are available to cover the positions. </p>
<p><strong>Market  Order (MKT)</strong><br />
  An order to buy or sell a specified commodity, including quantity and delivery  month at the best possible prices available, as soon as possible. </p>
<p><strong>Market-If-Touched  (M.I.T.) Order</strong><br />
  A price order that automatically becomes a market order if the price is  reached. </p>
<p><strong>Market  on Close (MOC)</strong><br />
  An order to buy or sell at the end of the trading session at a price within the  closing range of prices. </p>
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<p><strong>Offer</strong><br />
  Indicates a willingness to sell a futures contract &nbsp;at a given price. Also called &quot;Ask&quot;. <em>See Bid</em></p>
<p><strong>Offset</strong><br />
  Taking a second futures or options position opposite to the initial or opening  position. This means selling, if one has bought, or buying, if one has sold, a  futures or option on a futures contract. <em>See Liquidate</em></p>
<p><strong>Open  Order</strong><br />
  An order to a broker that is good until it is canceled or executed. <em>See GTC</em></p>
<p><strong>Open  Outcry</strong><br />
  Method of public auction for making verbal bids and offers in the trading pits  or rings of futures exchanges. </p>
<p><strong>Or  Better Order (OB)</strong><br />
  A type of a limit order in which the market is at or better than the limit specified.  The term is often used to help clarify that the order was not mistakenly given  as a Limit when it looks like it should be a Stop Order. </p>
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<p><strong>Performance  Bond (Margin)</strong><br />
Funds that must be deposited as a performance bond by a customer with his or  her broker, by a broker with a clearing member, or by a clearing member, with  the Clearing House. The performance bond helps to ensure the financial  integrity of brokers, clearing members and the Exchange as a whole. </p>
<p><strong>Pit</strong><br />
  A specially constructed arena on the trading floor of some exchanges where  trading in a futures contract is conducted. On some exchanges the term  &quot;ring&quot; designates the trading area for a commodity.</p>
<p><strong>Position</strong><br />
  A market commitment. A buyer of an initial futures contract is said to have a  long position and, conversely, a seller of an initial futures contract is said  to have a short position.</p>
<p><strong>Price  Discovery</strong><br />
  The generation of information about &quot;future'' cash market prices through  the futures markets. It has been said that futures markets are often the place  of &quot;original price discovery&quot; because that's where the buyers and  sellers are brought together to determine the price. As in any auction, the  last price is considered to reflect the sum total of opinions about what price  an item should be valued. </p>
<p><strong>Price  Limit Order</strong><br />
  An order that specifies the highest price at which a bidder will pay for a  contract, or the lowest price a seller will sell a contract. This type of order  is used to &quot;limit&quot; how much the trader is willing to &quot;give  in&quot; on price to get the order filled. </p>
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<p><strong>Settlement  Price</strong><br />
The last price paid for a commodity on any trading day. The exchange  clearinghouse determines a firm's net gains or losses, margin requirements, and  the next day's price limits, based on each futures and options contract settlement  price. If there is a closing range of prices, the settlement price is  determined by averaging those prices. Also referred to as Settle or Closing  Price. Thinly traded options may be traded at a theoretical value.</p>
<p><strong>Scalp</strong><br />
  To trade for small gains. Scalping normally involves establishing and  liquidating a position quickly, usually within the same day, hour or even just  a few minutes. </p>
<p><strong>Short</strong><br />
  (1) The selling side of an open futures contract; (2) a trader whose net  position in the futures market shows an excess of open sales over open  purchases. <em>See Long</em>.</p>
<p><strong>Speculator</strong><br />
  One who attempts to anticipate price changes and, through buying and selling  futures contracts, aims to make profits. A speculator does not use the futures  market in connection with the production, processing, marketing or handling of  a product. </p>
<p><strong>Spot</strong><br />
  Market of immediate delivery of and payment for the product.</p>
<p><strong>Spread</strong><br />
  The price difference between two related markets or commodities. </p>
<p><strong>Spreading</strong><br />
  The simultaneous buying and selling of two related markets in the expectation  that a profit will be made when the position is offset. Examples include:  buying one futures contract and selling another futures contract of the same  commodity but different delivery month; buying and selling the same delivery month  of the same commodity on different futures exchanges; buying a given delivery  month of one futures market and selling the same delivery month of a different,  but related, futures market.</p>
<p><strong>Stop  Order</strong><br />
  Sometimes called a Stop Loss Order, although it can be used to initiate a new  position as well as offset an existing position. It's an order to buy or sell  when the market reaches a specified point. A stop order to buy becomes a market  order when the futures contract trades (or is bid) at or above the stop price.  A stop order to sell becomes a market order when the futures contract trades  (or is offered) at or below the stop price. An order to buy or sell at the  market when and if a specified price is reached.</p>
<p><strong>Stop  Limit</strong><br />
  A variation of a stop order. A stop with limit order to buy becomes a limit  order at the stop price when the futures contract trades (or is bid) at or  above the stop price. A stop order to sell becomes a limit order at the stop  price when the futures contract trades (or is offered) at or below the stop  price. </p>
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<p><strong>Tick</strong><br />
Smallest increment of price movement possible in trading a given contract. </p>
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<p><strong>Associated Person (AP)</strong><br />
  An individual who solicits orders, customers, or customer funds (or who  supervises persons performing such duties) on behalf of a Futures Commission  Merchant, an Introducing Broker, a Commodity Trading Advisor, or a Commodity  Pool Operator.<br />
  <br />
  <strong>Audit Trail</strong><br />
  The record of trading information identifying the parties involved in a  transaction - the Floor Broker, Clearing Firm, customer, etc. - as well as the  terms and time of the trade.</p>
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<p><strong>Boiler Room</strong><br />
  An enterprise which often is operated out of inexpensive, low-rent quarters  (hence the term &quot;boiler room&quot;) that uses high pressure sales tactics  (generally over the telephone) and possibly false or misleading information to  solicit generally unsophisticated investors.</p>
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<p><strong>CFTC</strong><br />
  <em>See Commodity Futures Trading Commission</em><br />
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<strong>Clearing Margin</strong><br />
Financial safeguards to ensure that clearing members (usually companies or  corporations) perform on their customers' open futures and options contracts.  Clearing margins are distinct from customer margins that individual buyers and  sellers of futures and options contracts are required to deposit with brokers.  <em>See Customer Margin</em>.<br />
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<strong>Clearing Member</strong><br />
A member of an exchange clearinghouse. Memberships in clearing organizations  are usually held by companies. Clearing members are responsible for the  financial commitments of customers that clear through their firm.<br />
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<strong>Clearinghouse<br />
</strong>An agency or separate corporation of a futures exchange that is responsible for  settling trading accounts, clearing trades, collecting and maintaining margin  monies, regulating delivery, and reporting trading data. Clearinghouses act as  third parties to all futures and options contracts acting as a buyer to every  clearing member seller and a seller to every clearing member buyer.<br />
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<strong>Commodity Futures Trading Commission  (CFTC)</strong><br />
A federal regulatory agency established under the Commodity Futures Trading  Commission Act, as amended in 1974, that oversees futures trading in the United  States. The commission is comprised of five commissioners, one of whom is  designated as chairman, all appointed by the President subject to Senate  confirmation, and is independent of all cabinet departments.<br />
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<strong>Commodity Pool</strong><br />
Similar to what a mutual fund is to the securities industry. An enterprise in  which funds contributed by a number of persons are combined for the purpose of  trading futures contracts or commodity options.&nbsp; <br />
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<strong>Commodity Pool Operator (CPO)</strong><br />
An individual or organization that operates or solicits funds for a Commodity  Pool.<br />
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<strong>Commodity Trading Advisors</strong><br />
A person who, for compensation or profit, directly or indirectly advises others  as to the value or the advisability of buying or selling futures contracts or  commodity options. Advising indirectly includes exercising trading authority  over a customer's account as well as providing recommendations through written  publications or other media.<br />
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<strong>Customer Margin</strong><br />
Within the futures industry, financial guarantees required of both buyers and  sellers of futures contracts and sellers of options contracts to ensure  fulfillment of contract obligations. FCMs are responsible for overseeing  customer margin accounts.</p>
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<p><strong>Delivery</strong><br />
  The transfer of the cash commodity from the seller of a futures contract to the  buyer of a futures contract. Each futures exchange has specific procedures for  delivery of a cash commodity. Some futures contracts, such as stock index  contracts, are cash settled.</p>
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<p><strong>Exchange</strong><br />
  <em>See Futures Exchange</em></p>
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<p><strong>FCM</strong><br />
  <em>See Futures Commission Merchant</em><br />
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  <strong>Floor Broker (FB)</strong><br />
  An individual who executes orders for the purchase or sale of any commodity  futures or options contract on any contract market for any other person. A  Floor Broker executing orders must be licensed by the CFTC.<br />
  <br />
  <strong>Floor Trader</strong><br />
  An exchange member who generally trades only for his/her own account or for an  account controlled by him/her. Also referred to as a &quot;local.&quot;<br />
  <br />
  <strong>Futures Commission Merchant (FCM)</strong><br />
  A firm or person engaged in soliciting or accepting and handling orders for the  purchase or sale of futures contracts, subject to the rules of a futures  exchange and, who, in connection with solicitation or acceptance of orders,  accepts any money or securities to margin any resulting trades or contracts.  The FCM must be licensed by the CFTC.<br />
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  <strong>Futures Exchange</strong><br />
  A central marketplace with established rules and regulations where buyers and  sellers meet to trade futures and options on futures contracts. </p>
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<p><strong>Initial Margin</strong><br />
  The minimum value on deposit in your account to establish a new futures or  options position, or to add to an existing position. Initial margin amount  levels differ by contract. Increases or decreases in Initial Margin levels  reflect anticipated or actual changes in market volatility. Also called  &quot;Initial Performance Bond. <br />
  <br />
  <strong>Introducing Broker (IB)</strong><br />
  A person or organization that solicits or accepts orders to buy or sell futures  contracts or commodity options but does not accept money or other assets from  customers to support such orders.</p>
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<p><strong>Maintenance Margin</strong><br />
  The minimum value that you must keep in your account in order to continue to  hold a position. The Maintenance Margin is typically less than the Initial  Margin, and also differs by contract. If your account falls below the  Maintenance Margin requirement, you will receive a margin call. If you wish to  continue to hold the position, you will be required to restore your account to  the full Initial Margin level (not to the Maintenance Margin level). Also known  as the Maintenance Performance Bond. <br />
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  <strong>Margin</strong><br />
  <em>See Performance Bond</em><br />
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  <strong>Margin Call</strong><br />
  A demand from a clearinghouse to a clearing member, or from a brokerage firm to  a customer, to bring margin deposits up to a minimum level required to support  the positions held. This can be done by either depositing more funds or  offsetting some or all of the positions held. <br />
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  <strong>Mark-To-Market (Marked-To-Market)</strong><br />
  The daily adjustment of margin accounts to reflect profits and losses.</p>
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<p><strong>National Futures Association (NFA)</strong><br />
  An industry-wide, industry-supported, self-regulatory organization for futures  and options markets. The primary responsibilities of the NFA are to enforce  ethical standards and customer protection rules, screen futures professionals  for membership, audit and monitor professionals for financial and general  compliance rules, and provide for arbitration of futures-related disputes.</p>
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<p>  <strong>Performance Bond (Margin)</strong><br />
  Funds that must be deposited as a performance bond by a customer with his or  her broker, by a broker with a clearing member, or by a clearing member, with  the Clearing House. The performance bond helps to ensure the financial  integrity of brokers, clearing members and the Exchange as a whole. <br />
  <br />
  <strong>Position Limit</strong><br />
  The maximum number of speculative futures contracts one can hold as determined  by the Commodity Futures Trading Commission and/or the exchange upon which the  contract is traded. Also referred to as trading limit.</p>
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<p><strong>Registered Representative</strong><br />
  A person employed by, and soliciting business for, a commission house or  Futures Commission Merchant.<br />
  <br />
  <strong>Reporting Level</strong><br />
  Sizes of positions set by the exchanges and/or the CFTC at or above which  commodity traders or brokers who carry these accounts must make daily reports  about the size of the position by commodity, by delivery month, and whether the  position is controlled by a commercial or non-commercial trader.<br />
  <br />
  <strong>Rules</strong><br />
  The  principles for governing a Futures Exchange. In some Exchanges, rules are  adopted by a vote of the membership, while regulations can be imposed by the  governing board.</p>
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      <p><strong>Alpha  Capture</strong><br />
What we call &quot;company-specific trading&quot; in our tutorials. Alpha  refers to that part of a stock's risk and return that is attributable to the  stock individually, as apposed to the overall market. Alpha capture is a spread  trade between a stock future and a stock index future.</p>
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      <p><strong>Basis</strong><br />
The difference between the current cash price and the futures price of the same  commodity. The basis is determined by the costs of actually holding the  commodity versus contracting to buy it for a later delivery (i.e., a futures  contract). The basis is affected by other influences as well, such as unusual  situations in supply or demand. Unless otherwise specified, the price of the  nearby futures contract month is generally used to calculate the basis. <em>See  Carrying Charge</em></p>
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      <p><strong>Carrying  Charge (Cost To Carry)</strong><br />
For physical commodities such as grains and metals, the cost of storage space,  insurance, and finance charges incurred by holding a physical commodity. In  interest rate futures markets, it refers to the differential between the yield  on a cash instrument and the cost necessary to buy the instrument. <em>See Basis</em></p>
      <p><strong>Cash  Price</strong><br />
        The price of the actual underlying commodity that a futures contracts is based  upon. In the case of SSF, the price of the underlying stock.</p>
      <p><strong>Cross-Margining</strong><br />
        A procedure for margining related securities, options, and futures contracts  jointly when different clearing houses clear each side of the position.</p>
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      <p><strong>Day  Trade</strong><br />
The purchase and sale of a futures or an options contract in the same day, thus  ending the day with no established position in the market or being flat.</p>
      <p><strong>Day  Traders</strong><br />
        Speculators who take positions in futures or options contracts and liquidate  them prior to the close of the same trading day.</p>
      <p><strong>Derivative</strong><br />
        A type of investment whose value depends on the value of other investments,  indices or assets. Futures contracts and stock options are common types of  derivatives.</p>
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      <p><strong>Futures</strong><br />
A term used to designate all contracts covering the purchase and sale of  financial instruments or physical commodities for future delivery on a  commodity futures exchange. </p>
      <p>        <strong>Futures  Contract</strong><br />
        A legally binding agreement, made on the trading floor of a futures exchange,  to buy or sell a commodity or financial instrument sometime in the future.  Futures contracts are standardized according to the quality, quantity, and  delivery time and location. </p>
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      <p><strong>Hedge</strong><br />
The purchase or sale of a futures contract as a temporary substitute for a cash  market transaction to be made at a later date. Usually it involves opposite  positions in the cash market and futures market at the same time.</p>
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      <p><strong>Initial  Margin</strong><br />
The minimum value on deposit in your account to establish a new futures or  options position, or to add to an existing position. Initial margin amount  levels differ by contract. </p>
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      <p><strong>Leverage</strong><br />
The ability to control large dollar amounts of a commodity with a comparatively  small amount of capital.</p>
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      <p>        <strong>Maintenance  Margin</strong><br />
The minimum value that you must keep in your account in order to continue to  hold a position. The Maintenance Margin is typically less than the Initial  Margin, and also differs by contract. If your account falls below the  Maintenance Margin requirement, you will receive a margin call. If you wish to  continue to hold the position, you will be required to restore your account to  the full Initial Margin level (not to the Maintenance Margin level). Also known  as the Maintenance Performance bond.</p>
      <p>        <strong>Margin</strong><br />
        <em>See Performance bond</em>.</p>
      <p>        <strong>Margin  Call</strong><br />
        A demand from a clearinghouse to a clearing member, or from a brokerage firm to  a customer, to bring margin deposits up to a minimum level required to support  the positions held. This can be done by either depositing more funds or  offsetting some or all of the positions held. </p>
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      <p>        <strong>Pair  Trading</strong><br />
Another term for Spread Trading but more specifically to securities (stocks in  particular) rather than commodities. Commonly refers to buying one stock and  selling another related stock against it. An example would be spreading Coke  SSF against Pepsi SSF.<em> See also Spread Trade</em>.</p>
      <p>        <strong>Performance  bond (Margin)</strong><br />
        Funds that must be deposited as a performance bond by a customer with his or  her broker, by a broker with a clearing member, or by a clearing member, with  the Clearing House. The performance bond helps to ensure the financial  integrity of brokers, clearing members and the Exchange as a whole. </p>
      <p>        <strong>Physical  Delivery</strong><br />
        The transfer of the underlying commodity from the seller of a futures contract  to the buyer of a futures contract. Each futures exchange has specific  procedures for delivery of a physical commodity. Some futures contracts, such  as stock index contracts, are cash settled.</p>
      <p>        <strong>Position  Trader</strong><br />
        An approach to trading, in which the trader either buys or sells, contracts and  holds them for an extended period of time.</p>
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      <p>        <strong>Single-Stock  Futures (SSF)</strong><br />
SSF are an agreement between two parties that commits one party to buy a stock  and one party to sell a stock at a given price and on a specified date. They  are similar to existing futures contracts for gold, crude oil, bonds, and stock  indices. Unlike actual stock, there is no ownership or voting rights contained  in a SSF. <em>See also Universal Stock Futures</em></p>
      <p>        <strong>Spread  Trade</strong><br />
        The simultaneous buying and selling of two related markets in the expectation  that a profit will be made when the position is offset. Examples include:  buying one futures contract and selling another futures contract of the same  commodity but different delivery month; buying and selling the same delivery  month of the same commodity on different futures exchanges; buying a given  delivery month of one futures market and selling the same delivery month of a  different, but related, futures market.</p>
      <p>        <strong>Stock  Index</strong><br />
        An indicator used to measure and report value changes in a selected group of stocks.  How a particular stock index tracks the market depends on its composition the  sampling of stocks, the weighting of individual stocks, and the method of  averaging used to establish an index.</p>
      <p>        <strong>Stock  Index Futures</strong><br />
        Futures contracts on a stock index, such as the Standard &amp; Poor's 500 or  the Dow Jones Industrial Average. Stock index futures contracts are a  derivative of the underlying index, and are cash-settled.</p>
      <p>        <strong>Systemic  Risk</strong><br />
        Market risk due to price fluctuations which cannot be eliminated by diversification.</p>
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      <p>        <strong>Universal  Stock Futures</strong><br />
Same as Single-Stock Futures, but used to refer to those contracts that trade  on the LIFFE. <em>See also, Single-Stock Futures</em>.</p>
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      <p><strong>Arbitrage</strong><br />
The simultaneous purchase and sale of identical or equivalent financial  instruments or commodity futures in order to benefit from a discrepancy in  their price relationship. </p>
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      <p><strong>Basis</strong><br />
      The difference between the current cash price and the futures price of the same  commodity. The basis is determined by the costs of actually holding the  commodity versus contracting to buy it for a later delivery (i.e., a futures  contract). The basis is affected by other influences as well, such as unusual  situations in supply or demand. Unless otherwise specified, the price of the  nearby futures contract month is generally used to calculate the basis. <em>See  Carrying Charge</em></p>
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      <p><strong>Circuit  Breakers</strong><br />
A system of trading halts and price limits on equities and derivative markets  designed to provide a cooling-off period during large, intraday market  movements. </p>
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      <p><strong>Financial  Instrument</strong><br />
There are two basic types: (1) a debt instrument , which is a loan with an  agreement to pay back funds with interest; (2) an equity security, which is a  share or stock in a company. </p>
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      <p>        <strong>Program  Trading</strong><br />
A catch-all phrase for trading activities that involve the purchase (or sale)  of a large number of stocks. The term commonly includes computer aided stock  market buying or selling programs, portfolio insurance, and index arbitrage. </p>
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      <p>        <strong>Sell  Programs</strong><br />
A specific type of Index Arbitrage that involves the simultaneous purchase of  Stock Index Futures against the sale of a large number of stocks that comprise  (or closely resemble) the Index. </p>
      <p>        <strong>Shock  Absorber</strong><br />
        A temporary restriction in the trading of stock index futures which becomes  effective following a significant intraday decrease in stock index futures  prices. Designed to provide an adjustment period to digest new market  information, the restriction bars trading below a specified price level. Shock  Absorbers are generally market specific and at tighter levels than circuit  breakers.</p>
      <p>        <strong>Stock  Index</strong><br />
        An indicator used to measure and report value changes in a selected group of  stocks. How a particular stock index tracks the market depends on its  composition the sampling of stocks, the weighting of individual stocks, and the  method of averaging used to establish an index. </p>
      <p>        <strong>Systemic  Risk</strong><br />
        Market risk due to price fluctuations which cannot be eliminated by  diversification. </p>
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   <div class="title"><span class="num">-</span><i class="icon-plus acc-icon-plus"></i><i class="icon-minus acc-icon-minus"></i>Trading  Strategies Terms</div>
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      <p><strong>Black Box Trading</strong><br />
Black box trading, or automated trading, refers to the use of computerized  systems with buy and sell instructions generated by a proprietary software  program.</p>
      <p>        <strong>Bear Spread</strong><br />
        The simultaneous purchase and sale of two futures contracts in the same or  related commodities with the intention of profiting from a decline in prices  but at the same time limiting the potential loss if this expectation does not  materialize. In agricultural products, this is accomplished by selling a nearby  delivery and buying a deferred delivery.<br />
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        <strong>Bull Spread</strong><br />
        The simultaneous purchase and sale of two futures contracts in the same or  related commodities with the intention of profiting from a rise in prices but  at the same time limiting the potential loss if this expectation is wrong. In  agricultural commodities, this is accomplished by buying the nearby delivery  and selling the deferred.</p>
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      <p><strong>Cabinet Trade</strong><br />
A trade that allows options traders to liquidate deep out-of-the-money options  equal to less than one tick.</p>
      <p><strong>Call Option</strong><br />
        An option that gives the buyer the right, but not the obligation, to purchase  (go long) the underlying futures contract at the strike price on or before the  expiration date.</p>
      <p><strong>Convergence</strong><br />
        The tendency for cash and futures prices to come together (i.e., the basis  approaches zero) as the futures contract nears expiration.</p>
      <p><strong>Contrarian</strong><br />
        Contrarian traders take positions against the prevailing market trend, that is,  buy, or go long, when prices are falling and sell, or go short, when prices are  rising. A contrarian trader may aim to profit from a series of small trades  based on fluctuations within the prevailing trend, or may be anticipating a  change in direction based on momentum indicators or other analysis tools.</p>
      <p><strong>Counter-Trend</strong><br />
        Against the prevailing trend. The market may make a short-term counter-trend  move within a prevailing long-term trend. Counter-trend traders aim to take  advantage of this tendency by buying when prices are low and selling when  prices are high, or they may be anticipating a change in direction based on  momentum indicators or other analysis tools.</p>
      <p><strong>Counter-Trend Trading</strong><br />
        The method of trading by which a trader takes a position contrary to the  current market direction in anticipation of a change in that direction.<br />
        <br />
        <strong>Covered Call</strong><br />
        An option spread position where Calls are sold against a long position in the  underlying instrument. In essence, the trader is limiting his profit on the  long position in exchange for receiving the option premium. On option  expiration day, the breakeven on the long futures is lower by the amount of  option premium received, less commissions.<br />
        <br />
        <strong>Covered Option</strong><br />
        A short call or put option position which is covered by the sale or purchase of  the underlying futures contract or physical commodity. For example, in the case  of options on futures contracts, a covered call is a short call position  combined with a long futures position. A covered put is a short put position  combined with a short futures position. Also called a Covered Write. <em>See also  Covered Call and Covered Put</em>.<br />
        <br />
        <strong>Covered Put</strong><br />
        An option spread position where Puts are sold against a short position in the  underlying instrument. In essence, the trader is limiting his profit on the  short position in exchange for receiving the option premium. On option  expiration day, the breakeven on the short futures is raised by the amount of  option premium received, less commissions.</p>
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      <p><strong>Day Order</strong><br />
An order that is placed for execution during only one trading session. If the  order cannot be executed during that session, it is automatically cancelled.</p>
      <p>        <strong>Day Trade</strong><br />
        The purchase and sale of a futures or options contract during only one trading  session. If the order cannot be executed during that session, it is  automatically cancelled. A day trader places and liquidates trades during one  trading session.<br />
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        <strong>Day Traders</strong><br />
        Speculators who take positions in futures or options contracts and liquidate  them prior to the close of the same trading day.<br />
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        <strong>Day Trading</strong><br />
        <em>See Day Trade</em></p>
      <p><strong>Delta</strong><br />
        A measure of how much an option premium changes, given a unit change in the  underlying futures price. Delta is often interpreted as the probability the  option will be in-the-money by expiration.</p>
      <p><strong>Differentials</strong><br />
        Price differences between classes, grades, and delivery locations of various  supplies of the same commodity.</p>
      <p><strong>Discretionary Account</strong><br />
        An arrangement by which the holder of the account gives written power of  attorney to another person to make trading decisions. Also known as a  controlled or managed account.</p>
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      <p><strong>Exercise</strong><br />
The action taken by the holder of a call option if he or she wishes to purchase  the underlying futures contract or by the holder of a put option if he or she  wishes to sell the underlying futures contract.</p>
      <p><strong>Exercise Price</strong><br />
        The price at which the futures contract underlying a call or put option can be  purchased (if a call) or sold (if a put). Also referred to as strike price.</p>
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      <p><strong>Fill or Kill </strong><br />
A customer order that is a price limit order that must be filled immediately or  cancelled.</p>
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      <p><strong>Gamma</strong><br />
A measurement of how fast delta changes, given a unit change in the underlying  futures price.</p>
      <p><strong>Global Macro</strong><br />
        A strategy in which trading decisions are based on global economic and  political factors, that is, macroeconomic principles.</p>
      <p><strong>Good 'til Canceled (GTC)</strong><br />
        An order worked by a broker until it can be filled or until canceled <em>See Open Order</em>.</p>
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      <p><strong>Hedge</strong><br />
The purchase or sale of a futures contract as a temporary substitute for a cash  market transaction to be made at a later date. Usually it involves opposite  positions in the cash market and futures market at the same time.</p>
      <p><strong>Horizontal Spread</strong><br />
        The purchase of either a call or a put option and the simultaneous sale of the  same type of option with typically the same strike price but with a different  expiration month. Also referred to as a calendar spread.</p>
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      <p><strong>In-the-Money Option</strong><br />
An option with intrinsic value. A call option is in-the-money if its strike  price is below the current price of the underlying futures contract. A put  option is in-the-money if its strike price is above the current price of the  underlying futures contract.</p>
      <p><strong>Intrinsic Value</strong><br />
        The amount by which an option is in-the-money.</p>
      <p><strong>Inverted Market</strong><br />
        A futures market in which contracts nearer to expiration are priced higher than  those in more distant months. Also called backwardation, an inverted market  typically reflects a market facing a supply shortage.</p>
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      <p><strong>Limit Order (LMT)</strong><br />
An order type that specifies a certain maximum (or minimum) price, beyond which  the order (buy or sell) is not to be executed.</p>
      <p><strong>Liquid</strong><br />
        A characteristic of a security or commodity market with enough units  outstanding to allow large transactions without a substantial change in price.</p>
      <p><strong>Liquidate</strong><br />
        Selling (or purchasing) futures contracts of the same delivery month purchased  (or sold) during an earlier transaction. Or, making (or taking) delivery of the  cash commodity represented by the futures contract.</p>
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      <p><strong>Market Depth</strong><br />
A dimension of market liquidity that refers to the ability of the market to  handle large trading volumes without a significant impact on prices. Traders  may study market depth to determine how and when particular orders may impact  price action, and to help time the entry and exit of trades.</p>
      <p><strong>Market Neutral</strong><br />
        A trading strategy that aims to profit from both rising and falling prices,  often by taking a combination of long and short positions in one or more  markets. True market neutrality means the expected beta, or market risk, is  equal to zero. Traders who employ a market neutral strategy are attempting to  exploit market momentum.</p>
      <p><strong>Momentum</strong><br />
        The relative change in price over a specific time interval. Often equated with  speed or velocity and considered in terms of relative strength.</p>
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      <p><strong>Naked Option</strong><br />
The sale of a call or put option without holding an equal and opposite position  in the underlying instrument. Also referred to as an uncovered option, naked  call, or naked put.</p>
      <p><strong>NOB Spread (Notes over Bonds)</strong><br />
        A futures spread trade involving the buying (selling) of a 10-year U.S.  Treasury note futures contract and the selling (buying) of a U.S. Treasury bond  futures contract.</p>
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      <p><strong>One Cancels Other (OCO) Order</strong><br />
A pair of orders, typically limit orders, whereby if one order is filled, the  other order will automatically be cancelled.</p>
      <p><strong>Open Order (or Orders)</strong><br />
        An order that remains in force until it is canceled or until the futures  contracts expire.</p>
      <p><strong>Out-of-the-Money</strong><br />
        A term used to describe an option that has no intrinsic value. For example, a  call with a strike price of $400 on gold trading at $390 is out-of-the-money  $10.</p>
      <p><strong>Out-Trades</strong><br />
        A situation that results when there is some confusion or error on a trade,  e.g., over difference in the understanding of a price at which a trade is done,  or the number of contracts traded.</p>
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      <p><strong>Position Trader</strong><br />
An approach to trading, in which the trader either buys or sells, contracts and  holds them for an extended period of time.<br />
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<strong>Pyramiding</strong><br />
The use of profits on existing positions as margin to increase the size of the  position, normally in successively smaller increments.</p>
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      <p> <strong>Risk/Reward Ratio</strong><br />
The relationship between the probability of loss and profit. This ratio is  often used as a basis for trade selection or comparison.</p>
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      <p><strong>Scale Down (or Up)</strong><br />
To purchase or sell a scale down means to buy or sell at regular price  intervals in a declining market. To buy or sell on scale up means to buy or  sell at regular price intervals as the market advances.<br />
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<strong>Scalp</strong><br />
To trade for small gains. Scalping normally involves establishing and  liquidating a position quickly, usually within the same day, hour or even just  a few minutes.<br />
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<strong>Small Traders</strong><br />
Traders who hold or control positions in futures or options that are below the  reporting level specified by the exchange or the CFTC.<br />
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<strong>Spreading</strong><br />
The simultaneous buying and selling of two related markets in the expectation  that a profit will be made when the position is offset. Examples include:  buying one futures contract &nbsp;and selling  another futures contract of the same commodity but different delivery month;  buying and selling the same delivery month of the same commodity on different  futures exchanges; buying a given delivery month of one futures market and  selling the same delivery month of a different, but related, futures market.<br />
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<strong>Speculative Bubble</strong><br />
A rapid, but usually short-lived, run-up in prices caused by excessive buying  which is unrelated to any of the basic, underlying factors affecting the supply  or demand for the commodity. Speculative bubbles are usually associated with a  &quot;bandwagon&quot; effect in which speculators rush to buy the commodity (in  the case of futures, &quot;to take positions&quot;) before the price trend  ends, and an even greater rush to sell the commodity (unwind positions) when  prices reverse.</p>
      <p><strong>Straddle</strong><br />
        An option position consisting of the purchase or sale of put and call options  with the same expiration date and the same strike prices.</p>
      <p><strong>Strangle</strong><br />
        An option position consisting of the purchase or sale of put and call options  having the same expiration date but different strike prices.</p>
      <p><strong>Strong Hands</strong><br />
        When used in connection with delivery of commodities on futures contracts, the  term usually means that the party receiving the delivery notice probably will  take delivery and retain ownership of the commodity; when used in connection  with futures positions, the term usually means positions held by trade  interests or well-financed speculators.</p>
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      <p><strong>Time Value</strong><br />
The amount option buyers are willing to pay, above the intrinsic value, for an  option in the anticipation that, over time, a change in the underlying futures  price will cause the option to increase in value. In general, an option premium  is the sum of time value and intrinsic value. Any amount by which an option  premium exceeds the option's intrinsic value can be considered time and  volatility value. Also referred to as extrinsic value.</p>
      <p><strong>Trading Arcade</strong><br />
        A trading facility where independent traders can gather for computerized  trading, often operated by a clearing member.</p>
      <p><strong>Trailing Stop</strong><br />
        A technique often used in attempt to protect profits without limiting potential  gains by moving a stop up or down with the market. A stop order would be raised  on a long position in a bullish market, and lowered on a short position in a  bear market. For example, a trader initiates a long futures position when the  market is at $4, and places a protective stop at $3. The market then rallies to  $10. He or she then moves the stop up to $9, exiting the position if the market  falls to $9.      </p>
      <p><strong>Trend-Following</strong><br />
        Trend following is a strategy that follows the market's prevailing direction,  buying when prices are rising and selling when prices are falling. This  presumes the prevailing trend will continue.</p>
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      <p><strong>Vertical Spread</strong><br />
Buying and selling puts or calls of the same expiration month but different  strike prices.</p>
      <p><strong>Volatility Trading</strong><br />
        Strategies designed to take advantage of the changes in volatility of the  market rather than the direction of the market.</p>
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      <p><strong>Weak Hands</strong><br />
When used in connection with delivery of commodities on futures contracts, the  terms usually means that the party probably does not intend to retain ownership  of the commodity; when used in connection with futures positions, the term  usually means positions held by small speculators.</p>
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      <p><strong>Bar Chart</strong><br />
A chart that graphs the high, low, and settlement prices for a specific trading  session over a given period of time. </p>
      <p><strong>Bollinger Band</strong><br />
        An indicator used to compare volatility and relative price levels over a specified  time period. Three bands are plotted: a simple moving average, an upper band of  the simple moving average plus two standard deviations, and a lower band of the  simple moving average minus two standard deviations. When the markets become  more volatile, the bands widen, or move farther away from the average. When the  markets are less volatile, the bands contract, or move closer to the average.</p>
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      <p><strong>Candlestick Chart</strong><br />
Candlestick charts provide a quick visual picture of the relationship between  opening and closing prices and their relative strengths or weaknesses,  especially for extended periods. The body, which looks like a candle,  represents the difference between opening and closing prices. Shadows, which  look like wicks, represent price action above and below the body. </p>
      <p><strong>Channel</strong><br />
      The range of prices between support and resistance levels that a market has  traded in for a specific time period. </p>
      <p><strong>Charting</strong><br />
      The use of graphs and charts in the technical analysis of futures markets to  plot price movements, volume, open interest or other statistical indicators or  price movement. </p>
      <p><strong>Chaos Theory/Trading</strong><br />
      Also called non-linear dynamics, chaos theory involves complex analysis but is  essentially a tool to determine whether repetitive patterns and cycles exist in  the markets; that is, the presence of an underlying order. It involves the  study of historical price action and use of mathematical and statistical tools. </p>
      <p><strong>Closing Out</strong><br />
      Liquidating an existing long or short futures or options position with an equal  and opposite transaction. Also called offsetting. </p>
      <p><strong>Commitments of Traders Report (COT)</strong> <br />
      A weekly report from the CFTC providing a breakdown of each Tuesday&rsquo;s open interest  for markets in which 20 or more traders hold positions equal to or above the  reporting levels established by the CFTC. Open interest is broken down by  aggregate commercial, non-commercial, and non-reportable holdings.</p>
      <p><strong>Congestion</strong><br />
      A period of time characterized by repetitious and limited price fluctuations. </p>
      <p><strong>Correction</strong><br />
      A temporary reversal in prices following a significant trending period. </p>
      <p><strong>Counter-Trend Trading</strong><br />
        The method by which a trader takes a position contrary to the current market  direction in anticipation of a change in that direction.<br />
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      <p><strong>Directional Movement Index (DMI)</strong><br />
A trend-following indicator used to determine market trends. It has three  components--one for upward price movement, one for downward price movement, and  a third that measures the difference in these up-and-down market forces to  arrive at an index showing the strength of a trend.</p>
      <p><strong>Double Bottom</strong><br />
      Chart pattern describing a drop in price, a rebound, and another drop to the  same or close to the level of the first drop, then another rebound. The chart  typically looks like a &ldquo;W&rdquo; in shape, and the two bottom points of the W  represent support areas. </p>
      <p><strong>Double Top</strong><br />
        Chart pattern describing a rise in price, a fall, another rise to the same or  close to the level of the first rise, then another fall. The chart typically  looks like an &ldquo;M&rdquo; in shape, with the two top points of the M representing  resistance areas.<br />
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      <p><strong>Elliott Wave Theory</strong><br />
A theory named after Ralph Elliott, who contended that stock market trends move  in discernable and predictable patterns reflecting the basic harmony of nature.  In technical analysis, it reflects a charting method based on the belief that  all prices act as wavers, rising and falling rhythmically in a pattern of five  up and three down. Waves essentially reflect psychology or the marketplace as  it makes its normal rallies and corrections. </p>
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      <p><strong>Fibonacci</strong><br />
Leonardo Fibonacci was a thirteenth-century Italian mathematician who  discovered the significance and unique properties of a simple number series, in  which each numeral is added to the previous to create the next one in the  series: 0,1,2,3,5,8,13, etc. Fibonacci numbers, and more significantly the  ratio of those numbers to each other, can be found throughout nature and  cycles. Fibonacci ratios are used in technical analysis to predict retracement  areas during pullbacks, as well as targets, called &ldquo;extensions,&rdquo; for projected  price moves.</p>
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      <p><strong>Gann Theory</strong><br />
A method of predicting price movements through the relationship of geometric  angles in charts depicting time and price. The methodology was created by W.D.  Gann, a financial astrologer who was born in 1878 and became one of the most  successful traders of his time. Gann techniques can be complex, but are based  on price study, time study and pattern study and operate under the premise markets  are cyclical in nature. </p>
      <p><strong>Gap</strong><br />
        Price areas on a chart where no trading takes place. Gaps happen often in  markets that trade only part of a day because price-moving events and  announcements take place during times when markets are closed. Follow-up price action  may cover them, or &ldquo;fill the gap.&rdquo;</p>
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      <p><strong>Head and Shoulders</strong><br />
A chart formation that resembles a human head and shoulders and is generally  considered to be predictive of a price reversal. A head and shoulders top  (which is considered predictive of a price decline) consists of a high price, a  decline to the support level, a rally to a higher price than the previous high  price, a second decline to the support level, and a weaker rally to about the  level of the first high price. The reverse (upside down) formation is called a  head and shoulders bottom (which is predictive of a price rally).</p>
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      <p><strong>Liquid Market</strong><br />
A market in which selling and buying can be accomplished with minimal effect on  price. </p>
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      <p><strong>Momentum</strong><br />
The relative change in price over a specific time interval. Often equated with  speed or velocity and considered in terms of relative strength. </p>
      <p><strong>Moving Average</strong> <br />
        A statistical price analysis method of recognizing different trends. A moving  average is calculated by adding the prices for a predetermined number of days  and then dividing by the number of days. </p>
      <p><strong>Moving Average Convergence/Divergence (MACD) </strong><br />
        MACD analysis uses three moving averages, often exponential. Two of them are  based on the number of price periods used and the third an average of the  difference between the two moving averages. The difference between the readings  of the two moving averages is usually shown as a histogram, while the average  of that difference is shown as a moving average line plotted on top of the  histogram. An important part of MACD analysis is how its movements compare with  price movements to determine strength or weakness in the market.</p>
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      <p><strong>Open Interest</strong><br />
The sum of all long or short futures contracts in one delivery month in one  market that have been entered into and not yet liquidated by an offsetting  transaction or fulfilled by delivery. </p>
      <p><strong>Oscillator</strong><br />
        A term for indicators used to determine overbought and oversold conditions,  often useful when a clear trend can&rsquo;t easily be determined. Oscillators include  stochastics, moving average convergence/divergence, relative strength index and  momentum. </p>
      <p><strong>Overbought</strong><br />
        A term used to describe a technical opinion on a market that has risen too  steeply and too fast in relation to underlying fundamental factors. &nbsp;</p>
      <p><strong>Oversold</strong><br />
        A term used to describe a technical opinion of a market has declined too  steeply and too fast in relation to underlying fundamental factors. &nbsp;</p>
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      <p><strong>Parabolic Indicator</strong><br />
A strategy that uses trailing stops and a reverse method called  stop-and-reversal (SAR) to pinpoint entry and exit points. Price action above  the SAR would signal a bullish posture, price action below, a bearish posture. </p>
      <p><strong>Point-and-Figure Chart</strong><br />
        A method of charting that uses prices to form patterns of movement without  regard to time. It defines a price trend as a continued movement in one  direction until a reversal or predetermined criterion is met. Xs are used to  represent upticks, while Os represent downticks.</p>
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      <p><strong>Rally</strong><br />
An upward movement of prices. </p>
      <p><strong>Range</strong><br />
        The difference between the high and low price of a commodity during a given  trading session, week, month, year, etc. </p>
      <p><strong>Relative Strength Index</strong><br />
        The Relative Strength Index compares periods with up closes with periods that  have down closes to produce an index reading reflecting the strength of price  changes on a scale of 0 to 100. The index provides overbought or oversold  signals, and divergence/convergence with prices is an important part of the  analysis. </p>
      <p><strong>Resistance</strong> <br />
        A price area where new selling is expected to emerge to dampen a continued  rise. Areas of resistance are found above current prices. </p>
      <p><strong>Retracement</strong><br />
        A move opposite the direction of the main market trend. </p>
      <p><strong>Reversal</strong><br />
        A change in the direction of prices. </p>
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      <p><strong>Squeeze</strong><br />
A market situation in which the lack of supplies tends to force shorts to cover  their positions by offsetting at higher prices. </p>
      <p><strong>Stochastics</strong><br />
        Stochastics measures the closing price relative to the low of the range for a  selected period to indicate rising or falling momentum, providing trading  signals when its lines cross into overbought or oversold territory. As an  overbought/oversold indicator, the stochastic indicator attempts to forecast  turns in market action. </p>
      <p><strong>Support</strong><br />
        The place on a price chart where it is expected buying of futures contracts  will be sufficient to halt a price decline. Areas of support are found beneath  current prices.</p>
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      <p><strong>Technical Analysis </strong><br />
An approach to forecasting commodity prices that examines the patterns of price  change, rates of change, and changes in volume of trading and open interest,  without regard to underlying fundamental market factors. </p>
      <p><strong>Trend</strong><br />
        The general direction, either up or down, in which prices have been moving.</p>
      <p><strong>Trend lines</strong><br />
        Lines drawn across successively higher bottoms in uptrending price action or  progressively lower tops in downtrending price action. Prices crossing a trend  line may indicate a change in direction has occurred. </p>
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      <p><strong>Volatility</strong> <br />
A measurement of the change in price over a given time. </p>
      <strong>Volume</strong> <br />
The number of purchases and sales of futures contracts or options on futures  contracts made during a specified period of time.
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   <div class="title"><span class="num">-</span><i class="icon-plus acc-icon-plus"></i><i class="icon-minus acc-icon-minus"></i>Glossary of Options Terminology</div>
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      <p><strong>Black-Scholes Model</strong><br />
A mathematical formula for calculating the value of an option. Initially  developed by F. Black and M. Scholes for securities options and later refined  by Black for options on futures. </p>
      <p><strong>Butterfly Spread</strong><br />
        A three-legged spread in futures or options. In the option spread, the options  have the same expiration date but differ in strike prices. For example, a  butterfly spread in soybean call options might consist of two short calls at a  $6.00 strike price, one long call at a $6.50 strike price, and one long call at  a $5.50 strike price. </p>
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      <p><strong>Call</strong><br />
An option contract giving the buyer the right but not the obligation to  purchase the commodity or to enter into a long futures position. </p>
      <p><strong>Called</strong><br />
      Another term for &quot;exercised&quot; when the option is a call. The writer of  a call must deliver the indicated underlying commodity &nbsp;when the option is exercised or called. </p>
      <p><strong>Covered Call</strong><br />
      An option spread position where Calls are sold against a long position in the  underlying instrument. In essence, the trader is limiting his profit on the long  position in exchange for receiving the option premium. On option expiration  day, the breakeven on the long futures is lower by the amount of option premium  received, less commissions. </p>
      <p><strong>Covered Option</strong><br />
      A short call or put option position which is covered by the sale or purchase of  the underlying futures contracts or physical commodity. For example, in the  case of options on futures contracts, a covered call is a short call position  combined with a long futures position. A covered put is a short put position  combined with a short futures position. Also called a Covered Write. <em>See also  Covered Call and Covered Put</em>. </p>
      <p><strong>Covered Put</strong><br />
        An option spread position where Puts are sold against a short position in the  underlying instrument. In essence, the trader is limiting his profit on the  short position in exchange for receiving the option premium. On option  expiration day, the breakeven on the short futures is raised by the amount of  option premium received, less commissions. <br />
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      <p><strong>Delta</strong><br />
A measure of how much an option premium changes, given a unit change in the  underlying futures price. Delta often is interpreted as the probability that  the option will be in-the-money by expiration. <br />
      </p>
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      <p><strong>Exercise</strong><br />
The action taken by the holder of a call option if he wishes to purchase the underlying  futures contract or by the holder of a put option if he wishes to sell the  underlying futures contract. </p>
      <p><strong>Exercise Price</strong><br />
        The price at which the futures contract underlying a call or put option can be  purchased (if a call) or sold (if a put). Also referred to as Strike Price. </p>
      <p><strong>Expiration Date</strong><br />
        The last day that an option may be exercised into the underlying futures  contract. Also, the last day of trading for a futures contract. </p>
      <p><strong>Extrinsic Value</strong><br />
        <em>See Time Value</em>. </p>
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      <p><strong>Gamma</strong><br />
A measurement of how fast Delta changes, given a unit change in the underlying  futures price. </p>
      <p><strong>Grant</strong><br />
        <em>See Write</em></p>
      <p><strong>Grantor</strong><br />
        <em>See Option Seller</em></p>
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      <p><strong>Holder</strong><br />
One who purchases an option. </p>
      <p><strong>Horizontal Spread</strong><br />
        The purchase of either a call or put option and the simultaneous sale of the  same type of option with typically the same strike price but with a different  expiration month. Also referred to as a calendar spread. </p>
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      <p><strong>In-the-money Option</strong><br />
An option with intrinsic value. A call option is in-the-money if its strike  price is below the current price of the underlying futures contract. A put  option is in-the-money if its strike price is above the current price of the  underlying futures contract. <em>See Intrinsic Value</em>. </p>
      <p><strong>Intrinsic Value</strong><br />
        The amount by which an option is in-the-money. <em>See In-the-Money Option</em>. </p>
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      <p><strong>Momentum</strong><br />
        The relative change in price over a specific time interval. Often equated with  speed or velocity and considered in terms of relative strength. </p>
      <p><strong>Moving Average</strong> <br />
        A statistical price analysis method of recognizing different trends. A moving  average is calculated by adding the prices for a predetermined number of days  and then dividing by the number of days. </p>
      <p><strong>Moving Average Convergence/Divergence (MACD) </strong><br />
        MACD analysis uses three moving averages, often exponential. Two of them are  based on the number of price periods used and the third an average of the  difference between the two moving averages. The difference between the readings  of the two moving averages is usually shown as a histogram, while the average  of that difference is shown as a moving average line plotted on top of the  histogram. An important part of MACD analysis is how its movements compare with  price movements to determine strength or weakness in the market.</p>
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      <p><strong>Naked Option</strong><br />
The sale of a call or put option without holding an offsetting position in the  underlying commodity. </p>
      <p><strong>Net Options Value</strong><br />
        The credit or debit value of all option positions combined. It is  marked-to-market. </p>
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      <p><strong>Option</strong><br />
A contract giving the holder the right, but not the obligation, hence,  &quot;option,&quot; to buy (call option) or sell (put option) a futures  contract in a given commodity &nbsp;at a  specified price at any time between now and the expiration of the option  contract. </p>
      <p><strong>Option Buyer</strong><br />
        The purchaser of either a call or put option. Option buyers receive the right,  but not the obligation, to assume a futures position. Also referred to as the  holder. </p>
      <p><strong>Option Premium</strong><br />
        The price of an option. The sum of money that the option buyer pays and the  option seller receives for the rights granted by the option. </p>
      <p><strong>Option Seller</strong><br />
        The person who sells an option in return for a premium and is obligated to  perform when the holder exercises his right under the option contract. Also  referred to as the Writer or Grantor. </p>
      <p><strong>Option Spread</strong><br />
        The simultaneous purchase and sale of one or more options contracts, futures,  and/or cash positions. </p>
      <p><strong>Out-of-the-Money Option</strong><br />
        An option with no intrinsic value, i.e., a call whose strike price is above the  current futures price or a put whose strike price is below the current futures  price. Its value is solely time related. </p>
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      <p><strong>Premium</strong><br />
      <em>See Option Premium</em>. </p>
      <p><strong>Put</strong><br />
      An option to sell a commodity, security, or futures contract at a specified  price at any time between now and the expiration of the option contract. In particular,  a Put gives the option buyer the right but not the obligation to sell (go  &quot;short'') the underlying futures contract at the strike price on or before  the expiration date. </p>
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      <p><strong>Ratio Hedge</strong><br />
The number of options compared to the number of futures contracts bought or  sold in order to establish a hedge that is risk neutral. </p>
      <p><strong>Ratio Spread</strong><br />
        This strategy, which applies to both puts and calls, involves buying or selling  options at one strike price in greater number than those bought or sold at  another strike price. </p>
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      <p><strong>Short Options Value</strong><br />
The total cost of purchasing back all short options. It is marked-to-market.  Market movement may cause bids and offers to be away from the last reported  price. </p>
      <p><strong>Spread</strong><br />
        <em>See Option Spread</em>. </p>
      <p><strong>Straddle</strong><br />
        An option position consisting of the purchase (or sale) of both calls and puts  having the same expiration and the same Strike Price. </p>
      <p><strong>Strangle</strong><br />
        An option position consisting of the purchase (or sale) of both puts and calls  having the same expiration but different Strike Prices. </p>
      <p><strong>Strike Price</strong><br />
        <em>See Exercise Price</em>. </p>
      <p><strong>Synthetic Futures</strong><br />
        A position created by combining call and put options. A synthetic long futures  position is created by combining a long call option and a short put option for  the same expiration date and the same strike price. A synthetic short futures  is created by combining a long put and a short call with the same expiration  date and the same strike price. </p>
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      <p><strong>Theta</strong><br />
A measure of the sensitivity of the value of the option to the passage of time.  In math terms, Theta is the derivative of the option price equation with  respect to the remaining time to expiration of the option. </p>
      <p><strong>Time Value</strong><br />
        The amount of money option buyers are willing to pay, above the intrinsic  value, for an option in the anticipation that, over time, a change in the  underlying futures price will cause the option to increase in value. In  general, an option premium is the sum of time value and intrinsic value. Any  amount by which an option premium exceeds the option's intrinsic value can be  considered time value. Also referred to as Extrinsic Value. </p>
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